1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

O'Brien Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: Varlable costs per unit: Manufacturing Direct materials Direct labor Varlable manufacturing overhead Varlable selling and administrative $26 $16 $3 $1 Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses $510,000 $120,000 During its first year of operations, O'Brien produced 97,000 units and sold 80,000 units. During its second year of operations, it produced 84,000 units and sold 96,000 units. In its third year, O'Brien produced 82,000 units and sold 77000 units. The selling price of the company's product is S75 per unit